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Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss. An insurer is a company that sells insurance; insured or the policyholder is a person or entity buying the insurance. The insurance rate is a factor that is used to determine the amount which is to be charged for a certain amount of insurance coverage, and is called the premium.

In India, the insurance sector has gone through many phases and changes. Since 1999, when the government started with the insurance sector by allowing private companies to solicit insurance & also allowing FDI up to 26%, the insurance sector has been observed to be a booming market. However, the largest life-insurance company in India is still very much owned by the government.

Insurance and Tax:

1)U/s 10(10A) (iii) of the Income Tax Act, any payment received by way of commutations of pension is exempt from tax

2)U/s 10(10D), any sum received under a Life Insurance policy (not being a Key Man policy) is also exempt from taxation. But it is wise to remember that Pensions received from Annuity plans are not exempted from Income Tax.

3) U/s 10(13), following are exempt from tax. Payments received from an approved Annuation Fund made

On death of a beneficiary

To an employee in lieu of an annuity on his retirement or after a specified age

In form of refund of contributions on the death of a beneficiary, etc

4)Section 80 CCC gives a deduction of up to Rs.10,000/- to any individual assessee for any amount paid to effect or keeping in force any annuity plan of LIC for receiving pension.